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Investing for retirement pays off

More than half of Australians with investment properties or shares are proactively preparing for retirement, according to MLC’s Australia today report.

In comparison, only 15% of people without investment properties or shares feel prepared for retirement. It’s clear investing is one way to significantly boost confidence in retirement.

The “Retirement-ready” movement

We’ve all read the stories of the retirement funding or super gap, the shortfalls and the large sums of money required to retire comfortably. Rather than feeling overwhelmed by the savings needed and giving up, many Australians are now becoming ‘retirement ready’ by proactively investing in shares and property, well ahead of retirement.

Proactively investing earlier in life is a way to save the concept of a recreational retirement – that blissful hiatus after ceasing work, when you’re healthy and able to enjoy the rewards of your investments.

Re-defining retirement

‘Retirement’ in many dictionaries means ‘ceasing to work’1, and some even called it ‘being put out to pasture’ (an age-old term for retiring workhorses – hardly flattering). Today, retirement means far more than ceasing work and/or relevance – it’s a third chapter in our lives where we can finally stop work, or reduce our work hours and pursue some of our dreams.

As long as we have the savings and investments required to support our intended lifestyle.

Are you planning a recreational or partial retirement?

How much you’ll need to save and invest depends on the retirement you’re planning.

If your primary goal for retirement is to enjoy leisure pursuits, travel and hobbies, you’re planning a recreational retirement, which will cost more in leisure expenses. If your main retirement goal is to work part-time, commence an ‘encore career’, offer to regularly volunteer or study something new, you’re planning a partial retirement and you’ll be subsidised to an extent by continuing income and potential tax advantages of working beyond age 60.

According to Laura Demasi, Research Director for MLC’s Australia today report, whatever retirement lifestyle you’re planning, retirement is extraordinarily busy and expensive. “The current baby boomers who have recently retired are busier than ever in retirement,” explains Demasi. “They’re travelling more than ever before and juggling demands of helping kids with renovations and looking after grandkids. They have less super so will rely on inheritances, government support or may need to draw down on the primary home in their later years. ”

People are divided about the concept of continuing work

Pre-retirees and retirees are clearly divided at the concept of continuing work. If you have enough super savings and investments, you can choose whether you want to continue working. But for many, that’s not an option.

“Lots of people are talking about delaying retirement because they don’t have enough super. We are seeing a mixed response to the concept of delayed retirement or partial retirement,” comments Demasi.

 “Many people are horrified at the concept of having to work until they’re 70, coupled with concerns they may not be able to, as there is the perception that companies will prefer to employ a younger worker. Also people working in physical jobs are concerned. On the other hand, some people like the social engagement and intellectual stimulation of working. Many baby boomers don’t want to disappear into irrelevance and they don’t want to step into old age. If you have enough super, you have a choice whether you want to work or not.”

Small savings today can give you more control later

Whichever retirement you’re planning, if you want the flexibility to make choices about your future, you’ll need a level of financial power to give you that freedom.

Small reductions in weekly spending can add up substantially over the long term. Increasing your contributions to super, investing in property and shares and seeking help from a financial professional can give you much more flexibility and control over your lifestyle when you retire.

Demasi comments: “The key insight is that those people currently working, who have super investments and are getting help from financial professionals, are feeling more confident about their retirement.”

Financial professionals help motivate you to invest

MLC’s Australia Today report found that people who use the services of financial professionals were also much more likely to feel prepared for retirement, with a key factor being professionals motivating people to build their super balance.

In a hypothetical question, respondents were asked: “If someone gifted you with $50,000, what would you do with the money?” Those who used the services of a financial professional contributed significantly more to their super than those without professional financial advice.

Contributing more to super can be an effective way to save on tax and provide for a more secure financial future in retirement.

 

Read more from Australia today

Financial advice boosts confidence in retirement

Financial professionals reduce reliance on government support

Pre-retirees are toping up their super

Will your super be enough in retirement?

Knowledge gives you super power

A path to saving retirement

Solving the gender gap in retirement

 

Sources:

MLC and IPSOS, Australia today report, Aug 2016.

1 Oxford University Press, 2016.